The Import Administration of the Commerce Department announced on September 27 a preliminary decision to terminate its suspended anti-dumping investigation on Mexican tomatoes as requested by U.S. tomato growers.  The Commerce Department also said if they make a final decision to terminate the suspended investigation it would also terminate a related suspension agreement that has governed U.S. tomato imports from Mexico since 1996.

The implementation of NAFTA on January 1, 1994 eliminated a U.S. import tariff on Mexican tomatoes.  Almost immediately U.S. tomato producers for the winter fresh market accused Mexican producers of dumping tomatoes at low prices and driving domestic producers out of business.  The November 1, 1996 agreement suspended an investigation by the Commerce Department that began as a result of a dumping complaint filed by tomato growers in the U.S. against Mexican producers.  A 2008 agreement review established a revised floor price for Mexican tomatoes at $0.172 per pound in the summer and $0.216 per pound in the winter.

U.S. growers argue they cannot compete at those prices and wanted the deal terminated, not renegotiated.  They believe it no longer is effective in protecting them from unfair competition from Mexico. Termination would allow them to file a new anti-dumping petition for new tariffs.  The Commerce Department instead launched a ‘changed circumstances’ review to judge the level of support in the U.S. tomato industry for the suspension agreement.  The public has a 40 day comment period starting on October 2 when the notice appeared in the Federal Register.  A final decision on the preliminary decision must be made by May 13, 2013.

According to analysis by the Economic Research Service of USDA, tomato prices in the U.S. and Mexico this past winter were depressed at $0.30 per pound because of good crops in both countries.  Winter freezes in parts of the two countries in the previous two years had resulted in winter tomato prices of $0.80 to $1.00 per pound.  The expansion in greenhouses and other protected facilities in Mexico also reduces weather uncertainties in production.

Mexican tomato growers have made a proposal to the Commerce Department to keep the suspension agreement in place.  They would accept a higher floor price for their tomatoes, substantially expand the number of growers covered by the agreement and strengthen enforcement by involving the Mexican government in addition to the U.S. government.  The two parties to the suspension agreement are the Mexican tomato growers and the Commerce Department.  U.S. tomato growers are not a party to the suspension agreement, but the Commerce Department will brief the U.S. growers as interested stakeholders.  The New York Times reported thatReggie Brown, Executive Vice President of the Florida Tomato Exchange, said he could not envision anything that the Mexicans could offer that would make the agreement palatable to the American growers.

The Mexican government indicated it will retaliate to the fullest extent allowed.  They consider the preliminary decision to end the suspension of the anti-dumping case to be an attempt by the Obama Administration to gain support of farmers in a key swing state in the Presidential election.  Talk of Mexican retaliation brought up comparisons to the NAFTA trucking situation when Mexico placed tariffs on $2.4 billion of U.S. agricultural exports to force the Obama Administration to alter its position.  The value of Mexican tomato exports to the U.S. is $1.9 billion per year.